The Bull Hunters Guide

In last weeks post, we discussed investing in the Money Market and hopefully you’ve been learning a lot from our recent series intended to introduce you to all the other types of investment opportunities out there besides just investing in stocks.

The more options you’re aware of when it comes to investing your money, the wiser the decisions that you can make, and that leads to a happier, more secure future.

Talking Mortgage Backed Securities

Today we’re going to be talking about Mortgage Backed Securities. To put it simply, a mortgage backed security refers to an investment plan whereby you loan money to a homeowner or more frequently, to a corporation, with the promise that you are then entitled to a percentage of the interest that they are obligated to pay on their mortgage.

This is a type of investment that many banks are keen on making, because it allows them to act as a middle man, so to speak, without the responsibility of handling funds directly themselves.

Mortgage Backed Securities are usually secured by government institutions, so there is a minimal risk involved in their buying and selling. They are considered to be a very safe investment for the most part, with a payoff that is actually slightly better than that of treasuries, another popular option.

Monthly Income

Mortgage backed securities are a popular form of investment for those who want to be able to draw a monthly income from their investments, rather than selling for a lump sum of value. The amount of the monthly payment received is usually directly in line with the present interest rates driving the market.

The only drawback to Mortgage Backed Securities is simple: mortgages are expensive. That means that these securities are usually traded in large denominations, sometimes only going as low as 25,000 dollars a share. However, much like money market funds, there are some collaborative efforts available to allow amateur investors to get into mortgage backed securities. If you’re interested, it’s best to start out with these.

See you next week for part 10 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Over the last several installments, this blog has focused on other types of investments such as Life Insurance in last weeks article. This differs to what we usually focus on: stocks. The truth of the matter is simply that stocks, as much press as they get, are only one small type of investment.

There are dozens of other things you can do with your money. In order to help you decide which are best for you, we’ve been examining each type of investment in turn.

Money Market Securities

This time we’re going to be discussing money market securities. Much like bonds, money market securities are based on fixed income. Unlike bonds, however, money market securities are intended as short term investments and typically mature after only a year or so.

The only drawback really to Money Market Securities is that they typically are only available in high denominations. This puts them fairly beyond the reach of the majority of amateur investors. However, there is a way that many people have started investing in money market securities who would not otherwise be able to do so.

With the advent of money market mutual funds and money market bank accounts, investors can put money into these types of investments, which is then combined with the contributions of hundreds or thousands of other investors and used to purchased money market securities straight out. Obviously, the proceeds are then split up.

Low Risk And Short Term

Money market investments are usually considered to be very low risk because they’re such short term, and because they’re founded in secure enterprises such as government institutions.

You can buy and sell money market securities through most regular stock brokers. However, as we mentioned, you’ll most likely need to start out by investing in a money market mutual fund, which can be done for just a few hundred dollars. In addition to being more affordable, it will also give you a taste of the behavior of Money Market Securities to let you know whether or not you’ll be interested in pursuing them in the future.

See you next week for part 9 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Today I’m posting from Hong Kong. I’ll keep this one short and to the point.

Lately, we’ve been talking about the Federal Reserve. We mentioned how the group is structured, and what their primary responsibility is, as well as their inherent similarities to a bank. You might be asking, however, just why this information is useful to an investor. The reason is simple. It’s because, eight times a year, the Federal Reserve holds a meeting that is the primary motive force in determining financial policy, and thus the movements of the market.

Federal Open Market Commission

The Federal Open Market Commission holds their meeting as we said, eight times a year for the purpose of decided whether to increase or lower the federal funds rate. This isn’t an arbitrary decision though; they are greatly influenced by the market forces. Of course, it’s in their long term best interest to set rates that reflect the reality of the market, and this is exactly why it’s useful to pay attention.

The Federal Reserve has at their disposal a colossal amount of information relating to the market; far more than the average investor has at his or her disposal. While they don’t necessarily share this information itself, the way that they react to it can give one a really good idea of what’s going on behind the scenes and what is about to happen in the near future.

Increase Economic Growth

For example, if the Federal Reserve is trying to increase economic growth, it will reduce the overall funds rate, which may be a sign of an impending downturn that they’re trying to forestall. Likewise, if they need to stabilize too-rapid growth, they’ll increase the rate. In that instance, it might be a good time to put an eye towards selling as growth begins to level off.

Whatever the case, the Federal Reserve is something that is very much worth paying attention to for any serious investor. It’s not exactly necessary to understand each and every little detail of how they operate, but it will likely be of immense help to you if you can at least learn to monitor their policy decisions and know what those decisions predict for the movement of the market at large. It’s like having a team of committed professional analysts at your disposal, if you only know where to look!

As I’ll be away in Hong Kong all this week, I’ll do my best to post next weeks article on time. Bear with me as I might still be in holiday mode.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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This week, we’re going to cover another one of those “common sense” strategies that nevertheless always seem to be so helpful. The real problem with common sense is simply that: it’s common. It’s always right there, out in the open, so as time passes, people tend to overlook it. A pretty ironic situation, really. In light of that, let’s take a look at one of the bits of conventional stock market wisdom that really needs to be driven home, especially for young investors.

Compounding growth

Like with any other type of savings, compounding growth is more or less the end all and be all of investment. What starts as a 1000 dollar investment that gains 10 percent becomes a 1100 dollar investment. If it hits that same growth again, it becomes a 1210 dollar investment, and then a 1331 dollar one. Simply put, the longer you have your money working for you in some type of investment, the more growth it can achieve.

As such, it is critically important to start investing in the market as early as you can. Young investors need to take a look at the idea of diversification and find some way to balance that virtue with the virtue of having a few core stocks that you tend to keep with you over the life of your portfolio (always keeping an eye on them, of course).

Early means more time to profit

Investing early has another meaning as well: if you invest your funds early in the life of company, they will have more time to spend with that company as it matures and develops. If it goes on to be a successful company, you will have maximized your earnings by investing in them as early as you possibly could.

Remember, the real name of the game here is compounding. Receiving a gain on money that you invest is exactly equivalent to investing that new larger amount. As your initial investment grows, so to does the potential for future growth on that investment. Developing a long term strategy can help you go a long way.

See you next week for part 8 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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This time we’re going to talk a little bit about the ups and downs that are inherent in the market. The reason the stock market has such an alluring draw to many people isn’t just because of the potential to make a lot of money at it, but also because of its fast paced nature and it’s sense of adventure. Anyone who plays the market can literally be riding on a huge wave of success one minute and be totally wiped out the next. Everyone hopes to be the person who “got out just in time and made off good” or the person who “got in just in time, right before the spike hit“. This element of strategy and constant fluctuation is one thing that makes investing so enjoyable. Because of that, it’s important to remember that this up and down fluctuation is just an inherent feature of the stock market. When you see stocks wiggling up and down over a week’s time, think nothing of it. Such behavior is perfectly normal, and it’s long term trends that tend to reveal more useful information about a stock’s future projections.

Watch The Big Fluctuations

As hard as it might be to swallow, this advice applies to big fluctuations as well. Many times in the past, and many times in the future as well, the market has and will go through periods of decline known as “slumps“. When these happen, stocks across the entire broad tend to drop in value sharply, and it often takes people totally by surprise. Those who are unprepared for it might begin to panic. They’ll wonder if their long term strategies that seemed so sound yesterday were really so hot after all.

After Every Slump In History…

Changing your long term plans in the face of a slump is always a bad idea. If you want to put money into the market, don’t be afraid to do so. Remember that there’s no where to go from the bottom but up. This isn’t just useless optimism, either. After every slump in history, there’s been a corresponding spike of activity known as a rebound. Those who remain confident and continue on their normal course of activity throughout a slump are those who will be there to reap the rewards of the rebound as soon as it happens. Stick to your guns, and weather the slumps as best you can.

See you next week for part 3 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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